The Republic of Zuptania: Part 1

For months, ever since the FinMin Flip Flop on what is now known as 9/12, the alleged State Capture by the now infamous Gupta family via its ties with the Presidential Zuma family has utterly dominated the South African news sphere and even more so after the shock announcement of a Gupta ministerial offer made to Deputy Minister of Finance Mcebisi Jonas on 17 March 2016. The big question, however, is whether or not this outrage is actually warranted or more of a knee jerk trial-by-media reaction of the South African public which has previously proved itself predisposed to such types of overreactions?

I had originally planned to construct some sort of timeline of events from the Guptas first meeting President Zuma in 2003 to the reports of them landing back in India on 11 April 2016, but after hunting for news clippings and other facts for the better part of a week, I have discovered that there is simply too much information in terms of people events, dates and possible outcomes that much more would be required in order to lay this beast completely bare, if that is even possible without a Judicial Commission of Enquiry that has not been appointed by the ANC.  

Given the vast scope of the Gupta Busines Empire, I have no choice but to turn this inquiry into a series of posts evaluating the saga from numerous angles that will ultimately culminate in a series of conclusions and deductions, but also the many unanswered questions that it may render, even if I know to an almost absolute certainty that such an exposé will most likely be incomplete.

Before I continue, let me categorically state that I am not a detective, private investigator or even a journalist, I am an ordinary guy who occasionally pens a perfectly ordinary blog, but this seems important enough so first things first, the timeline. This timeline has been put together (as I said) through Google searches of news reports involving the Guptas, other key individuals and events that I feel are relevant to the saga. As a result, some of the dates mentioned below might not be entirely accurate and text in italics represent unverified allegations made by other individuals.

[Unknown] 1999: Pravin Gordhan appointed as Commissioner of the South African Revenue Service (SARS).

2003: The Gupta family meets Jacob Zuma (then Deputy President of the Republic) for the first time at a function hosted by the Guptas at Sahara Estate.

2005: The Gupta family supports Jacob Zuma during his power struggle against incumbent President Thabo Mbeki in the wake of the Shabir Shaik Corruption Trial. Zuma was fired from the Deputy Presidency on 14 June 2005. In the following years, Sahara Computers appoints members of the Zuma family as employees or board members.

18 December 2007: Jacob Zuma is elected ANC President at the Polokwane Elective Conference.

28 December 2007: The National Prosecuting Authority indicts Jacob Zuma to appear on 783 fraud and corruption charges in the High Court.

[Unknown] 2008: President Zuma’s daughter Duduzile is appointed to the Board of Directors of Sahara Computers.

8 July 2008: Duduzane Zuma acquires 25 shares (25%) of Mabengela Investments at R 1 per share.

28 July 2008: Mabengela Investments acquires 7.19% (60 shares) of Gemini Moon Trading 254.

September 2008: President Thabo Mbeki recalled from the Presidency due to the breakdown in the working relationship between himself and the newly elected NEC of the party.

30 September 2008: Duduzane Zuma appointed to Board of Directors of Westdawn Investments

1 February 2009: Duduzane Zuma appointed to Karibu Hospitality Board of Directors.

3 February 2009: Mabengela Investments acquires a further 102 shares in Gemini Moon Trading 254 for a total ownership stake of 17.3%. At this point Gemini held 28% ownership of Westdawn Investment/JIC Mining.

6 April 2009: Following months of legal battles and court appearances, the NPA drops all charges against Jacob Zuma due to procedural technicalities and political interference by former President Mbeki in what has become known as the “Spy Tapes Saga.”

9 May 2009: Jacob Zuma is sworn in as President of the Republic.

10 May 2009: Pravin Gordhan appointed as Minister of Finance to succeed Trevor Manuel.

3 June 2009: Duduzane Zuma appointed to Dixie Investment Board of Directors.

18 June 2009: Duduzane Zuma acquires a further 20 shares in Mabengela Investment; total ownership 45%

1November 2009: Duduzane Zuma appointed to the Boards of Directors of Islandsite Investments 254 and Islandsite Investments 255.

[Unknown] 2010: The Gupta family buys Shiva Uranium valued at R270 million with a R250 million loan from the Industrial Development Corporation (IDC)

April 2010: Imperial Crown Trading 289 (ICT), enters into a legal dispute regarding the 21.4% of the prospecting rights at the Sishen Iron Ore Mine (one of the world’s largest iron ore mines) with ArcelorMittal SA and Anglo American due to the Department of Mineral Resources awarding of prospecting rights to ITC after Arcelor failed to renew its license in time. ICT is 50% owned by Jagdish Parekh, an executive in a group of Gupta-owned companies. Parekh reportedly holds the shares on behalf of Gupta-owned JIC Mining (of which he is Managing Director), which is partly owned by Duduzane Zuma through Mabengela and Gemini Moon Trading.

14 April 2010: Duduzane Zuma appointed to Shiva Uranium Board of Directors

June 2010: TNA media is founded by the Gupta family

10 June 2010: Duduzane Zuma appointed to Dunrose Investments 180 Board of Directors

29 July 2010: Duduzane Zuma appointed to Sahara Holdings Board of Directors

26 August 2010: Duduzane Zuma appointed to Afripalm Horizons Board of Directors <Company currently in process of deregistration>

October (?) 2010: Atul Gupta allegedly tells ANC MP Vytjie Mentor that she would be Public Enterprises Minister within a week if she assisted in SAA dropping its routes to India once appointed. This was presumably in order to open the routes up to be serviced by Gupta owned Jet Airways.

1 November 2010: President Zuma shuffles his Cabinet, replacing Barbra Hogan with Malusi Gigaba. Fikile Mbalula is sworn in as Minister of Sports and Recreation; Julius Malema of the EFF alleges that he was present when one of the Guptas informed Mbalula of his new position, long before he received any official information.

23 November 2010: Duduzane Zuma appointed to CRCC Afripalm Construction Board of Directors <Company currently in process of deregistration>

6 December 2010: TNA Media published the first edition the New Age newspaper with an overt and stated bias in favour of the Government/ANC.

[Unknown] 2010: Themba Maseko, then CEO of the Government Communications and Information System (CGIS) meets Ajay Gupta at the latter’s Saxonworld home upon the instruction of President Jacob Zuma. During the meeting Gupta tells Maseko that he wants Government advertising funding channelled to the New Age Newspaper. Zuma allegedly told Maseko that “the Gupta brothers need your help.”

[Unknown] 2013: The repayment term for the R250 million IDC loan relating to the purchase of Shiva Uranium lapses with the loan partially unpaid. The IDC decides to convert the debt (accounting for 90% of the company’s purchase price) to an equity share of 3%.

April 2013: The Guptas’ private plane lands at Waterkloof Air Force Base and the 217 guests to a family wedding are given a blue light escort to Sun City. Chief of State Protocol Bruce Koloane authorised the landing by using Zuma’s name with the latter cancelling his attendance of the wedding after the incident, Guptagate, became public.

19 April 2013: A Daily Maverick article (by Mandy de Wall) reports that Government related advertising through State-owned Enterprises, Government Departments and other Government linked organisations were responsible for 60% (some R75 million) of the New Age Newspaper’s advertising revenues for 2012, with Telkom investing some R31 million with the paper during the year.

August 2013: Africa News Network (ANN7), owned by Infinity Media Networks launches on DSTV. Infinity’s ownership is comprised of Oakbay Investments (35%), Essel Media (35%), BEE partner Mabengela Investments (21%) and reserved shares 9%.

December 2013: The Constitutional Court rules against ICT with regards to the mining rights at Sishen Mine.

26 May 2014: Nhlanhla Nene appointed as Minister of Finance, moving Pravin Gordhan to Minister of Cooperative Governance and Traditional Affairs.

July 2014: Iqbal Sharma obtains a stake in VR Laser Services, the company in the lead to secure some R50 billion in tenders from Transet, while serving as Chairman of the committee overseeing the tender process. VR Laser Services is 25% owned by Gupta Mining Company JIC Mining Services, while a business “associate” Salim Essa owns 75%. Duduzane Zuma also got a stake through Westdawn Investments. The company’s current address is the same office used by other Gupta businesses.

September 2014: Mark Pamensky is appointed as a non-executive member the Oakbay Minerals and Resource Board of Directors.

27 September 2014: Tom Moyane takes office as Commissioner of the South African Revenue Service.

28 November 2014: Oakbay Resources and Energy listed on the Johannesburg Stock Exchange

December 2014: Mark Pamensky is appointed to the ESKOM Board of Directors.

August 2015: Glencore’s Optimum Colliery puts itself under financial rescue following a drop in coal prices and a R2.2 billion fine imposed on it by ESKOM for the supply of sub-specification coal to the Hendrina Power Plant in Mpumalanga. The company suspended its contract three weeks later.

September 2015: Former Free State MEC of Agriculture, Mosebenzi Zwane, is appointed and sworn in as Minister of Mineral Resources under dubious circumstances, circumventing normal Ministerial appointment procedures.

November 2015: Minister Zwane accompanies a delegation of Tegeta Exploration and Resources (Gupta owned) to Switzerland to help negotiate Glencore’s sale of the troubled Optimum Coal mine in Mpumalanga. ESKOM is reportedly keeping the R2.2 billion fine in place.

25 November 2015: Mabengela Investments acquire 317 shares (28.5%) in Tegeta Exploration and Resources at a cost of R100 million; Duduzane Zuma’s personal stake, 12.825%.

November 2015: Members of the Gupta family allegedly offers the post of Minister of Finance to Mcebisi Jonas (in the presence of Jacob Zuma’s son Duduzane) on the condition that he approves the Russian Nuclear Power deal and get rid of four prominent, high ranking officials at the Treasury.

November/December 2015: David van Rooyen and Minister Mosebenzi Zwane visit Dubai, United Arab Emirates, while members of the Gupta family is in the city. Van Rooyen insists that it was a private, one day visit before his appointment as Minister of Finance.

9 December 2015: Jacob Zuma replaces Nhlanlha Nene as Finance Minister with backbencher David van Rooyen, allegedly due to the former’s resistance the R1 trillion Russian Nuclear deal and, presumably, to make way for the creation of Denel Asia. Allegedly, the Russian Nuclear Deal is signed by the Zuma Cabinet on the same day.

13 December 2015: Under vast pressure from both the ANC and Business Sector, Jacob Zuma has no choice but to recall David van Rooyen and replace him with former Finance Minister Pravin Gordhan, relegating van Rooyen to being Minister of Cooperative Governance and Traditional Affairs.

15 December 2015: Tegeta Exploration and Resources is declared the preferred bidder to buy Optimum Coal mine and to continue the Mine’s ESKOM contract for coal to be delivered to the Hendrina Power Plant until December 2018.

20 December 2015: In a letter to Minister Lindiwe Sisulu, former Finance Minister Trevor Manuel alleges that a childhood friend of van Rooyen, Gaddafi Rabotapi, knew about van Rooyen’s appointment a month before he was sworn in.

21 January 2016: Mabengela opens a new account with Standard Bank; Duduzane Zuma sole authorised signatory.

29 January 2016: VR Laser Services announces that it has entered into a joint venture with DENEL to create DENEL Asia without prior approval by the Minister of Finance and Minister of Public Enterprises.

14 February 2016: Africa Confidential reveals two Gupta allies, Ian Whitley and Mohammed Bobat, as mystery advisors to Minister van Rooyen who showed up at the Treasury before van Rooyen was even sworn in as Finance Minister.

19 February 2016: Business Day reveals that advisor to Minister of Mineral Resources Mosebeni Zwane, Malcolm Mabaso, has ties to the Gupta family through a Directorship at Premium Security and Cleaning Services along with confirmed Gupta business partner Salim Essa.

26 February 2016: Mabengela is gifted another 71 shares in Tegeta Exploration and Resources to maintain ownership at 28.5% at a value of just under R96 million.

10 March 2016: EFF Chief Whip Floyd Shivambu alleges in a press release that the Guptas have moved R2 billion in funds from South Africa to the United Arab Emirates while the normal 10% levy on such transfers imposed by the South African Reserve Bank (SARB) has not been deducted from the transfer.

16 March 2016: Deputy Finance Minister Mcebisi Jonas publicly alleges that the Guptas offered him the position of Finance Minister prior to the sacking of Nanlha Nene on 9 December 2010.

17 March 2016: Former ANC Member of Parliament reveals that Atul Gupta offered her the position of Minister of Public Enterprises to replace Barbra Hogan just prior to the Cabinet-reshuffle in November 2010.

18 March 2016: Former ESKOM chairman Zola Tsotsi claims that he was removed from the ESKOM Board of Directors because she refused to facilitate business deals that would benefit Gupta owned businesses.

18 March 2016: The Dominican Order of Catholic Priests asks the Public Protector, Thuli Madonsela, to investigate the claims of the Guptas’ influence over Ministerial appointments.

20 March 2016: The Sunday Times report how Themba Maseko‚ former CEO of the Government Communications and Information System (GCIS)‚ told how President Jacob Zuma personally called him to ensure that he met the Gupta brothers at their Saxonwold compound in Johannesburg.

20 March 2016: ANC Secretary General invites party members with information about the Gupta state capture to come forward and provide proof of such influence at the ANC Headquarters at Luthuli House, asking such members to refrain from making the information public.

21 March 2016: Private investigator Paul o’Sullivan allegedly sends an email to the Directorate for Priority Crimes (Hawks) daring them to arrest him when he flies to London on 4 April 2016, since he would go an expose the “Zuptas to the world.” The claims include that “the Zupta crooks infiltrated and criminalised SAA, the SAPS, the Hawks and National Prosecuting Authority.”

23 March 2016: The Special Investigations Unit (Hawks) announce an investigation into the affairs of the Guptas and Duduzane Zuma.

31 March 2016: EFF leader Julius Malema alleges that President Jacob Zuma couriered some R6 billion of the Guptas’ money to Dubai on a recent visit.

1 April 2016: International auditing firm KPMG ends its fifteen year relationship with the Guptas, citing the association risk to its public image as primary reason.

3 April 2016: ABSA bank and investment bank SASFIN cut all ties and closes all accounts linked to Oakbay and the Guptas

4 April 2016: Paul o’Sullivan arrested at O.R Tabo International Airport for allegedly “contravening the Immigration Act.”

6 April 2016: First National Bank (FNB) indicates that it will close down all accounts linked to the Guptas; no reason cited.

7 April 2016: Atul Gupta, Ajay Gupta, their wives and five assistants leave the country late at night from Lanseria Airport carrying a mountain of luggage.

8 April 2016: The Guptas and Duduzane Zuma announce their immediate resignations from all Boards of Directors of Oakbay and other Gupta linked companies in separate statements issued to the press. Zuma also indicates that he will “exit” all his investments from the group of companies.

10 April 2016: City Press reveals Duduzane’s Equity share in various companies, that which could be valued, to be worth more than R700 million.

11 April 2016: Using planefinder.net, News24 reveals that the plane carrying the Guptas landed in Dubai before taking off (at 00.10 on Monday 11 April 2016) for Nakur, India, 30 kilometers from their ancestral town of Saharanpur.

14 April 2016: Pictures and reports emerge of President Zuma being present at the opening of a weapons factory in Saudi-Arabia during his latest state visit. The factory is reportedly a joint venture between Rheinmetall Denel Munition (RDM) and Saudi Military Industries Corporation (Samic).

I did call it a beast, didn’t I? But fear not, we will clear all this up in due time.

For Herman, Theo and Dr. Peace (if they are reading)

During a recent discussion with some people on a different platform, the land reform issue popped up yet again, so this piece that takes into account all that we’ve discussed amongst ourselves is mostly for their benefit. I don’t propose to see everything, know everything and have all the answers, thus I seek a discussion and input from readers; even if it is only for my own personal development.

 

If we are to make any sense of why the agrarian reform system in South Africa is not quite working at the moment, then we must first attempt to understand the underlying economic and social issues that the industry faces as they will complicate things as time goes by.

 

The sheer size of things

It is an often expressed fact that South Africa has tons of farmland in the hands of a few wealthy landowners and this issue is beyond dispute, but what we should clearly understand is that this phenomenon is not unique in the South African milieu nor is it the work of some mysterious supremacist faction or force. It has happened due to both a natural and economic progression.

 

As any economy shifts focus from the primary (agriculture, mining, fishing, forestry) economy and into the secondary (manufacturing) and tertiary (service) economy, there is a natural desire among younger generations to move along with it, since the new focus implies greater income and security. The effect this had on the farming industry is that many children of farmers, especially post 1994, simply did not have any interest in farming, so when their parents passed away, the farm was simply sold and most often to existing farmers in the area, thus leading to a growth in the average size of farms.

 

The second aspect that requires consideration is the fact that commercial farming is very much becoming an economy of scale industry. Due to the frankly massive increases in necessary inputs like fuel (roughly 550% since 2000 at current prices) and electricity (300%+ since 2008) farmers required ever increasing amounts of farmland in order to continue running profitable businesses and most small scale commercial farms were simply gobbled up in the process.

 

While it may seem an unrelated issue, this truth about our agrarian sector raises two very real problems for our land reform process. Firstly, we must keep in mind that the amount of agricultural land we have is finite, so any attempt form government to buy a large amount of farmland will lead to an increase in the price of farmland; it is basic economics. The second problem we must factor in is the fact that much of the infrastructure on previously smaller farms have fallen into disrepair or have since been demolished because they take up valuable space. If the large farms are then subdivided among beneficiaries of the process, they have to be capitalised in terms of housing, barns, equipment, et cetera in a project of which the cost can easily run into the hundreds of billions of Rand. This problem is very much a co-determinant of how fast we can proceed with the restitution project.

 

We simply do not have a clue

Another economic factor that further clouds and complicates the issue of massive commercial farms is the sheer lack of accurate information we are currently faced with. To my knowledge, there is currently no way for us to quickly and definitively determine who owns what amount of farmland; there is no register. Combined with this problem is the fact that we simply do not know what amount of farmland currently constitutes an economic unit, i.e. the amount of farmland in a particular area that would allow a farmer to make a decent living.

 

The truth is that continuing without this information means that we are effectively fumbling in the dark and could easily create a situation where we assign people a piece of farmland that they cannot make a living on, which would defeat the purpose of the entire exercise.

 

It is a tricky business

Commercial farming as a business comes with its own set of unique challenges, chief among which is the fact that the local market as a whole has very little power when it comes to setting the price farmers can expect for their goods. The SAFFEX price reported on the news every day is primarily determined by what is happening in the mega producing countries like the USA and Russia, so knowing then to write the futures contract for your goods is a specialised field on its own. The problem this creates for farmers is that they have to commit themselves to delivering a set amount of product of a set quality, but with an unsure outcome; they simply do not know if they will meet the terms of their contract until harvest day. If they do not, they then have to pay certain penalties stipulated by the contract. This, of course, determines the operating capital they have available for the next harvest season, so if the contract is written at the wrong price, in the wrong quantity or if some natural element prevents the farmer from meeting his contract, even a lot of vastly experienced farmers go under in this fashion.

 

The question here, and I might get lambasted for this, is how many people who qualify for land restitution (hell, how many people in general) have the required skills and knowledge to successfully navigate these challenges and what use is there in restoring them to farmland when there is a large chance that they do not and would most likely fail? This is, in my view, the sole reason for almost 80% of all land restitution projects failing or the land being resold within the first twenty four months of the transfer taking place.

 

It is very much socio-historic

Everything else aside, we must always keep in mind that we are talking about more than just mere assets here; we are talking about the livelihoods of current landowners who have committed no crimes and the historical injustices done to claimants. We also know from a debate that’s been raging for almost as long as we’ve been calling ourselves democratic that this is the major stumbling block in the entire process and while I will not even attempt to object to or discredit the social imperative of land restitution the historic nature of the claims do create an economic problem.

 

The majority of land claims in the country do not stem from individuals but from certain tribes that still exist within the broad South African population and the problem this ultimately creates is that communal land ownership is very rarely productive as is evident from the experiences and histories of land restitution in other African countries. Zambia is a chief example and what their experience has shown is not only the fact that internal squabbles often leave large tracts of agricultural land lying fallow, but that you are inevitably faced with a massive skills flight from the sector, since those with the most recent and up to date skills and knowledge regarding farming methods, et cetera are no longer within the industry.

 

But what about tomorrow?

The often unspoken fact of the matter is that as a nation, our food security is already under pressure. Due to economic considerations, many farmers are making the move from planting seasonal staple crops like wheat and corn to planting more lucrative permanent crops like pecans in order to avoid the yearly input costs required by seasonal crops. Additionally, evidence is beginning to surface that farms along the Vaal River and lower Oranje River systems (after it joins with the Vaal) are becoming less and less productive due to the regression in the water quality coming from higher up in the system. This is primarily due to the poor management of human waste in municipalities along the upper Vaal River and the increased amount of mine acid draining into the system.

 

To this point, we must come to the realisation that this project can have far more severe consequences for our society via greatly increased food prices and knock on inflation if we do not proceed with the utmost circumspection.

 

So how do we solve it?

While I am sure that other observers will point out a myriad of other problems, the ones that I have mentioned seem to be the larger broad economic problems facing the land reform process in South Africa today, but ultimately the number one problem with the land reform process has been political and that’s what needs changing before anything else.

 

Up until this moment in time, we have cited redress for historical injustices as our reason for attempting agrarian reform. While I am not attempting to rewrite or even defend our sordid history, we have to recognise that this stance immediately clouds the issue since it brings a lot of emotion and a victim vs. perpetrator orientation into the fold; this also causes us to dismiss legitimate concerns regarding the system as a victim mentality or attempts to protect white privilege. It therefore causes all of us to be on our heels or high horses and talk past one another instead of speaking with each other. This cannot continue.

 

I am truly of the opinion that we need to make a mental shift from historical redress and begin to put agrarian reform forward as a measure to economically develop our country and our people that will ultimately also address the societal and economic imbalances caused by our racially divided past. Once we’ve been able to do this, then sorting out the problems regarding agrarian reform merely becomes a matter of implementing a few tweaks to the system and I put forwards the following proposals.

 

Primarily, we really need to pay attention to our lack of information, since it hampers our ability to plan this properly. I believe that we should first find out who owns what land, who has a claim to what land and how much will be required in order to provide people with a decent living off the land. This will also go a long way in sifting out all the bullshit that is currently clouding the issue and when we do take on land restitution afterwards we can then create private land ownership for the maximum number of individuals with a reasonable certainty that they will be able to make a decent living as farmers.

 

As explained, I am diametrically opposed to the current system of the wholesale transfer of farmland to communities and it is not only because of the upwards pressure it puts on land prices, the additional pressure it places on our food security or the historic inefficiencies of communal ownership, but also because our budget for this is only so big. By purchasing the farm over a period of time (say 20% biannually over 10 years or one or two subdivided plots per year) you not only reduce the pressure on land prices, but also the impact that would be felt if the project happens to fail, while greatly increasing the odds that we can salvage projects in the event that they should fail. Additionally, you have the current farmer, who probably has vast experience farming in the area, on hand to act in a mentorship role to the benefit of the emerging farmer, thereby facilitating the transfer of skills from one generation of farmer to the next.

 

What should be clear is that there is no use in just replacing a white farmer with a black owner as we’ve been doing, but that we need to take steps to ensure that the necessary skills required by commercial farming are transferred to the new owners of the farm. It is currently estimated that Government owns about 14% or some 16.8 million hectares of farmland in the country. What we therefore need to do to ensure a transfer of skills and reduce the odds of the restitution project failing is to establish agricultural colleges and “proving” or rather “training” farms tailor made for people with no agricultural experience on parts of the Government owned land and use the remainder as possible restitution locations for future land claims in order to boost food security or merely to speed up the process as this land needs not be bought, but is readily available.

 

Since the lack of financial support and economic pressures in general have been pointed out as problems facing both the industry and our social imperative in recent years, we not only need to take steps to ensure that emerging farmers have access to sufficient operating capital and certain business support services like accountants during the first year or two, but that our farmers in general are adequately supported financially, as is the norm in most developed economies in the world. I mean, we can save farmers as much as 20% of their annual fuel-spend if we simply put a mechanism in place by which they can reclaim certain levies they pay on fuel from Government or receive a tax discount for it.

 

It turned out to be way more than two cents’ worth in the end, but hey, at least it is out there now and I won't charge you more than a penny.

More on the land reform issue

It’s no secret that I have always been in favour of Agrarian land reform in principle, but that I have my reservations with the system by which Government has sought to attain the redistribution. It is also no secret that I am completely opposed to the EFF’s policy of "overnight" expropriation without compensation, but I’ve only recently realised that I have never really giving full voice to why I am opposed to what is effectively the willy-nilly nationalisation of farmland. For me, there are simply too many unanswered questions surrounding this particular idea to support it.

Questions of occupancy

There is currently no system in place where we can quickly and definitively determine who owns what amount of farmland, so the immediate problem would be that you create massive uncertainty as to who has the right to occupy and work the land on behalf of the National Government should nationalisation ever occur. If we are not able to rapidly make changes to the occupancy of farmland, then indeed we have made no fundamental change and coupled with the fact that there is simply no definitive indication as to who has historical claim to what part and amount of farmland, we instantly create the very real possibility and prime conditions for the violent land grabs we’ve seen north of the Limpopo river.

The second question is the method of occupancy and remuneration of the people that work the land. In Russia for instance, the state paid people a salary for producing what they were ordered to produce, but irrespective of the amounts produced. The problem with this particular system, of course, is that there is simply no motivation for people to produce as much as possible because it does not determine their remuneration and theft of the produce, in order to avoid paying higher prices later on, was absolutely rife. This particular system also creates an absence of any sort of hierarchy, since everyone is paid the same salary and thus have no authority to tell other people what to do; people simply do not function as effectively without one because there will always be the perception of “I have to do everything around here” that will cause production to suffer.

The alternative, more modern system would be for farmers to rent the property from the state over the long term (50+ years) and take their profits as income in the normal fashion, but, as left wing detractors will argue, this is fundamentally no different from private ownership except for the fact that the State can place limits on how much land an individual is able or allowed to rent, while holding very little improvements for the lot of farmworkers. Capitalist detractors of such a system will no doubt point out that it opens up the door for large scale abuses by unscrupulous Government officials, would kill off all private investment in the agricultural sector and destroy access to credit in the agrarian sector of the economy.

The loss of skills question

A major argument against the redistribution of land is that the recipients of the land do not necessarily have the necessary skills to ensure the successful operation of a farm while the previous owners will simply leave and take their skills with them. Supporters of the system normally see this as an insult, but that particular concern is very real and one’s personal feeling about it does not make it less valid, because with a large scale transfer of land, there will be some level of skill loss, so it is only prudent to at least attempt to minimise its impact. It is a sad historical fact of South African land restitution that as much as 80% of all projects fail or become unproductive within 24 months of the land transfer taking place and if this should happen on a national scale, it is something that our economy will simply not recover from during the lifetime of anyone that happens to read this. In many other instances, the community is forced to rent the property to outside operators (often the previous owner) at a mere pittance of what they could have made if they operated things themselves and this is simply not the intended purpose of land reform in my opinion.

While many people would undoubtedly see this as yet another baseless claim that blacks cannot be successful farmers, the intention of this statement of fact is to serve as an indictment to both the absolute absence of support systems and the haphazard manner in which land reform has been applied in the past. The overall goal is not only the transfer of land, but also the skills necessary to fully exploit it and both of these aspects require serious investigation before we can attempt land reform in a responsible and non-destructive manner.

The question of Resources and Infrastructure

It is common knowledge that the amount of commercial farms and farmers has seen a steady decline over the past two or three decades due to both natural and economic considerations, even if there is nothing strange about this phenomenon. It is a common symptom of an economy that makes the move from the primary sector and into the secondary or tertiary sectors of the economy, since they offer bigger professional security and higher income. The problem created as far as the redistribution of land is concerned is that the resources and capital goods required for farming existing in the sector has also been reduced. Yes, it’s only logical that a larger farm would need more tractors for instance, but only up to a certain point, since more of them would mean that they are not being used with maximum efficiency. Another aspect not to be ignored is the fact that necessary structures like housing, barns and storage space for example, would have become fewer in line with the reduction in the amount of farms and the same applies to infrastructure where “unnecessary” infrastructure like roads, water delivery systems and electrical connections have been removed or allowed to deteriorate into oblivion.

The question thus becomes how the existing resources will be distributed and how shortages are to be met, because even if the farms are expropriated without compensation, Government would still be stuck with a capitalisation bill that could easily run into the billions, if not hundreds of billions, of Rand. Also, in the event of a total command structure, who will be responsible for the administration and cost of maintaining the mentioned equipment and structures? Since they are essentially owned by Government, it is only logical that Government should shoulder the responsibility, leading to a massive administrational problem.

The African experience

The experiences north of our borders since long before Mandela took his Long Walk to Freedom all show the same result; that it is highly risky and near economic suicide to attempt such reforms without due consideration and having iron clad systems in place. The country most on the up and up after forty years of this system being in place is Zambia and I would like to discuss their system as a possible model for South African use for a moment.

After colonisation ended in 1964, the new Republic sought a land reform project to replace that enforced on the country by the British. The specific land reforms were announced in the Mulungushi Economic Reforms of 1968 and these included the following:

1. all land should be vested in the President of the Republic of Zambia,
2. all land under freehold should be converted to leasehold tenure for  hundred years,
3. land under customary tenure not to be converted into leasehold, and
4. land reforms should be directed at improvement of the use of agricultural land

The problems encountered with this policy however was that the land was often not used productively, that the uncertainty created by the leasehold structure made it nearly impossible for farmers to access credit and that the land under customary tenure was poorly administered.  A more recent development of this land reform project is that Zambia no longer possesses people with the necessary skills to boost agricultural production in the country and the Government realised that it was time for a new round of land reform. Since then most of the non-tribal land in Zambia has been under a 99 year leasehold system that automatically renews upon expiration to overcome the problems with uncertainty of tenure and a provision was brought that allowed users of customary/tribal lands to obtain a leasehold on a piece of customary land after due investigation and consultations with tribal leadership in an attempt to make more efficient use of tribal agricultural lands.

In the most recent development, however, the Zambian Government began to actively court Zimbabwean, South African and Namibian commercial farmers in an attempt to overcome their agri-skills shortage and in their first year (2011/12) 100 Zimbabwean farmers brought hi-tech farming techniques to the country and managed to produce 70% of the country’s maize output, thus turning Zambia from a net importer to a net exporter of food, ironically supplying the bulk of Zimbabwe’s maize imports. The final changes are that the Zambian Government is endeavouring to overcome the lack of private investment in agriculture by providing tax/rent rebates on certain private investments in agriculture and that a Certificate of Occupancy by the Zambian Government is now accepted as legal collateral for banks in order to extend credit to farmers thanks to the automatic renewal of the lease.

What I think

First of all, I don’t favour a total command system since I think that it would simply be too big of a bureaucratic burden on a State that thus far seems to fall woefully short in matters of administration. I also think that we can learn a lot from the Zambian example as system that could be successfully applied to our situation, but I still do not think that an overnight change to such a system would be prudent, even if it were possible.

Every instance of land reform in Africa and the modern world points out the fact that it should be done with the utmost care and circumspection; adding to our problem is that we not only have different agricultural regions in the country (dry vs. wet land farming, crops vs. livestock, et cetera), each of which has different requirements, but that we are also facing a definite change in climate in most of these regions, thus rendering traditional crops less productive. So what we need, before we do anything else, is a complete investigation into four aspects of the process:

1. The viability of different crops and livestock in different regions
2. The amount of land that would constitute a “living income,” i.e. how much land is required in the different areas that would enable the farmer to make a decent living off the land, otherwise there is simply no point.
3. The size, scope and cost of the required capitalisation and infrastructure spend as it would most likely be the biggest determinant of the pace at which land reform can be achieved.
4. The total amount of outstanding bonds against agricultural land, because if the land is expropriated, who is responsible for the bond against it? We simply can expect the bank or previous owner to accept responsibility for this, so the responsibility should either fall to the new tenant or Government, since we risk huge losses in the financial system if the bond is merely “written off.”

Finally, a decision must be taken in the historical context; do we continue with historical land restitution claims as we have been doing or do we make the available land open to all South Africans who have a demonstrated will and ability to farm productively? This is perhaps the most sensitive and emotion laden issue surrounding the entire process, but both the domestic and international statistics show that tribal or communal tenure of large tracts of land is simply not as productive as land under individual curatorship.

What we as South Africans from all walks of life and economic persuasion must realise is that this debate is far from over, but if the day should arrive that a political organisation has a land reform policy that answers these (and I’m sure other people will have more) questions to my satisfaction, then I will most likely support it.

The upside of President Zuma

I am normally highly critical of the ANC under the leadership of Jacob Zuma, a man whose sole Presidential success among all the blunders was putting the dick back into dictator in my humble opinion, but since this morning I have been toying with another line of thought and you are free to start the lampooning as soon as I am finished, but has anyone ever considered the possibility that Jacob Zuma’s ANC might just be the best thing that has ever happened to our Democracy?

The day the earth moved beneath the party lines

Since the advent of our democracy, we have come to know the ANC as a political party and its alliance with the Congress Of South African Trade Unions and South African Communist Party as a united front in the interest of the disenfranchised and formerly oppressed people of South Africa. Nelson Mandela wowed us with his message of hope and forgiveness, while President Mbeki kept everyone placated with his economic “magic” which kept the ANC and Alliance on steady ground, but the ground has moved beneath their feet since then.

It all started the day when the “Pirates of Polokwane” won the ANC nomination from President Mbeki in 2008 and while this is quite normal for any political organisation, the eventual recall of a sitting President in September of that year gave the first indication of “cracks” in the wall. The recall, combined with the breakaway that resulted in the formation of the Congress of the People, was the indication that there were indeed deep seated philosophical divides inside the organisation itself and if we consider the makeup of President Zuma’s cabinet, an assertion that tribalism (in the form of the Xhosa-Zulu rivalry is) alive and kicking as well does not fall oustide the realm of logic.

Since taking power, however, President Zuma is solely responsible for the erosion of the moral high ground that the party once occupied and this has been done through the various corruption scandals that the Zuma family were so blatantly involved in, ultimately culminating in Nkandla and Guptagate. More importantly though, the President (and perhaps Gwede Mantashe) made serious political errors that now have the power to turn the tremors beneath their feet into a full blown political earthquake.

Mount Vavi

When he first came to power, one of the Jacob Zuma administration’s major supporters and campaigners was COSATU Secretary General Zwelinzima Vavi, but the man quickly became disillusioned with the vast difference between the more populist policies promised by Zuma and the lack of practical change. Before long, this stalwart was highly outspoken against the increasing amount of corruption and self-enrichment that was starting to take place inside the Zuma Government. We all remember that he was the one who called for “lifestyle audits” to be made mandatory for all Ministers, Members of Parliament and their families and it was Vavi who first likened them to “an elite of political hyenas.” In the eyes of Zuma and Co, Vavi became a thorn in their sides and took such an offense to these statements that the ANC threatened to charge the COSATU man with “ill-discipline.” The rivalry came to a head this year with Vavi’s outright and defiant refusal to let go of the trade federation’s fight against the “privatisation of South Africa’s roads” through the e-Tolling system.

It is common knowledge that Vavi has been suspended by the federation as of 14 August 2013 pending the outcome of an internal disciplinary action surrounding the irregular appointment of a young woman and his eventual sexual relationship with her, but thanks to the mentioned threat of disciplinary action against the Secretary General and Zumantashe’s (I know it’s corny as hell, but it remains fitting) proclivity towards getting rid of political dissidents in an almost Stalinesque fashion, many people inside the federation see the accusations levelled against Vavi and his subsequent suspension as just another way in which the ANC cabal is trying to eliminate a political opponent from the scene.

The major player in the COSATU rift is the National Union of Metalworkers of South Africa (NUMSA) and theirs is another curious case of South African politics. Up until last December’s Mangaung Policy Conference, NUMSA was standing in the “forces for change” camp in opposition to President Zuma’s re-election, but a last minute meeting with former NUMSA President Cedric Gina saw the union switching sides. Gina resigned earlier in the week, however, and now we find NUMSA squarely back on the opposite side of the fence under the leadership of Irvin Jim. This proves problematic for the ANC as it means that they will effectively lose the union structures that has given them easy access to some 320 000 NUMSA members and if NUMSA (the biggest member union following the AMCU split in the NUM) should draw their line in the sand, it could mean losing access to even more potential voters, thus putting a serious dent in the party’s electioneering machinery.

Political Storm Malema

What makes the NUMSA sting ever more poignant for the ANC is that NUMSA, in step with NUM breakaway AMCU, now seems to be in support of the far-left policies put forward by the Economic Freedom Fighters of Julius Malema. There is simply no need for me to repeat the story of Julius Malema or the fact that Zumanatashe effectively created his, but the major threat that he poses not only that he understands the inner workings of the party and alliance better than anyone, but that he has managed to effectively hijack the support of the poor and the unemployed by dusting off the ANC’s Freedom Charter. This is actually a master gambit since many of the still disenfranchised people country view the concessions that the ANC made in this regard in the 1990’s as a betrayal of the people of South Africa and the core values of the movement. The threat Malema poses to the ANC and the alliance does not stop there, however, since he is known (and rose to prominence) for his precise ability to make connections, irrespective of their relevance, between the past and the present.

The fact that the EFF as a political party was launched on “Marikana Hill” is no accident, for example, because it paints the ANC in the same light as the erstwhile National Party by virtue of the similarities between the Marikana and Sharpeville massacres, so we can expect that more of these similarities will be drawn by the EFF in the days to come. Ultimately, the ANC has to be extremely careful with regards to its election strategy and actions as Government going forward, because the EFF, and particularly Julius Malema, has absolutely nothing to lose, making them a distinctly dangerous animal.

The unmentioned aspect of the EFF aspect, of course, is the SACP and should the alliance indeed tear in two, it is not hard to imagine where the whipping boy of the Tri-Partite Alliance will find itself, because I think that the "hardline" members of the SACP are simply drooling at the prospect of communism reborn via the EFF.

The AGANG/DA breeze

It is a historical, often publicly lamented fact that the ANC seems to be unable to keep the support of the growing black middle class that it is responsible for creating through its redress policies. Perhaps it is because of the fact that as Government, the ANC is incapable of attending to their revised needs and interests, or maybe it is because the black middle class has clued into the fact that having a certain amount of wealth is not what it is made out to be politically. Whatever the case may be, I think we can safely assume that this fact, coupled with public perception that the DA is too white, gave rise to the birth of AGANG SA led by Dr Mamphela Ramphele and also not to be forgotten in its birth is the fact that this will be the first election in which the “born free” section of our society will vote without the historic allegiance to any of the older political parties in the country. Some people will also refer to AGANG SA as a possible new home for the disgruntled ANC cadres who lost out at Polokwane and Mangaung, as well as those in the ANC who cannot agree with the leftist shift in the party’s policies or do not see an opportunity for them to try to preserve the spirit of Mandela’s ANC from within. The party, as I see it, was formed with the sole purpose of serving as the middle-point between the left-leaning ANC and the right-wing, liberal DA.

The DA on the other hand has apparently (and rather haphazardly) realised that race issues still matter in modern day South Africa and true to all expectation, COSATU has responded by saying that the black caucus inside the DA has finally managed to put Madam Zille in her place, but I have a different point of view. Due to the excessive spending and corruption on all levels of Government, the party that prides itself on “clean governance” wherever it enjoys power, has considered the recent service delivery protests in places like Bekkersdal as a clear sign that the black vote is now more available to them than it had ever been and the change in their policy (to reflect that which they know has historically worked for the ANC) is nothing but an attempt to cash in on the disillusionment that many people feel with the ANC, especially given the developments on that side of the political fence, but it remains nothing but a move from possessive liberalism to developmental liberalism and I doubt that we will ever see the pure leftist policies of the ANC and the EFF coming from the DA.

The ANC on the 55.5% precipice

Individually, these developments in our political landscape do not mean much, but in combination they could easily see the ANC pushed to, or over, the 55.5% precipice. This is the point in our political system that determines the amount of freedom that the ruling party enjoys and at anything over 55.5%, you can pretty much do anything that will not result in the loss of more than 10% of your support base, anything under that though and a 10% loss in your support base would mean that you would lose your parliamentary majority come the next election.

This is a conundrum that the ANC is more than acutely aware of and that is why Secretary General Mantashe is hard at work inside the COSATU structures to minimize the damage of the NUMSA split that seems to be a foregone conclusion. In the event that other unions follow suit or that a rival federation gains more support than COSATU, the ANC will lose their de facto ownership of the largest segment of the South African voting public and that could very well determine whether they win or lose the 2019 elections. In this worst case scenario it will become necessary for the ANC to step up on pure governance and truly delivering on its election promises of a better life for all. It would seem however, that even the ANC itself has serious reservations on its ability to do that.

I say again, Jacob Zuma; the best thing that’s ever happened to South Africa’s democracy.

Actually, we need the other thing administered by someone else

During recent times I have been highly critical of all the economic policies put forward by Julius Malema’s Economic Freedom Fighters, even if I do agree with all the economic concerns they put forward. What I am yet to do, however, is to put forward my own suggestions on how we can alleviate these problems in the short term, while completely solving them in the long run and this, incidentally, is exactly the problem when it comes to my (true) neo-liberal economics; these solutions take time to bear any meaningful fruit, decades in fact, and thus they are almost impossible to sell to an electorate where the majority of people live in abject poverty and feel excluded from mainstream economic activity. Before I continue though, I feel that it is necessary to include a few side notes to ensure that we are all in the same ballpark.

Side note 1: Money is no object

We’re not working from a perspective where we have enough money to do whatever we like, but the perspective that the only function of currency in economics is a) to serve as a meter of value and b) increase economic efficiency. There is nothing to prevent you, for example, from buying your next car with 10 tons of frozen chicken or a couple of tons of grain, but the economic problem arises when you have to pair that which you have (grain or chicken) with that which the car dealer wants or needs. He might prefer to be paid in beef, so then you have to go find a beef farmer who wants chicken or grain and ultimately you could search for months until you find the person who is selling what you want while being willing to accept what you intend to pay with. Now you just pay the man in currency and he can buy his own grain, chicken, beef or whatever else he wants to buy. Your employer could also pay you in product if he so wished, assuming that he pays in a product you need, and this therefore means that the notion that poverty is related to income levels is actually invalid and that poverty is actually linked to the relative cost of living.

Side note 2: The role of private banks

People seem to subscribe to the fallacious notion that private banks are somehow responsible for direct economic investment when in actual fact they perform but a few economic functions. The three chief functions of the private banking system is to a) serve as collection points of the public’s currency (read economic value), b) increase economic efficiency through the pooling of resources and c) to “create money.” What actually happens in the banking system is the following: Let’s say that Mrs. X and one thousand other people have R1000.00 in their bank accounts with ABSA (collection point of currency) and that MR. Y now wants finance for his business to the value of R900 000. Instead of Mr. Y now having to go negotiate terms of loan with Mrs. X and 1000 other people, he merely visits ABSA bank to fill out a loan application (increased economic efficiency), but because the money being lent does not belong to the bank, they have to ensure that Mr. Y is credit worthy and that the clients’ money will not be lost. Mr. Y then pays his suppliers who bank at FNB and the cycle can start over again. Theoretically, the South African banking system can create R40 of credit for every Rand (value divided by the Reserve Requirement) that is banked with them and that is how “money is created,” but financiers have to be remunerated for the credit risk they undertake and that is why banks pay and charge interest to their clients; the reason for the disparity in interest paid/charged is that the bank should receive recompense for its role as financial intermediary. There are of course other safety requirements placed on the banks by the South African Reserve Bank, so the number is actually less but we are not discussing Bank Economics at the moment.

Side note 3: The non-linear value of money

Believe it or not, this is actually a mathematical poker theory that I am applying to matters of economy and it states that R50 is not equal to R50 is not equal to R50. The simple fact of the matter is that the relative value of money is entirely dependent on the overall income of the person it belongs to, i.e. R50 is worth much more to someone who earns R3500 per month than to someone who earns R15 000 per month. Since many of the suggestions that I am going to make will benefit the wealthy and the poor alike, the fact is that even a smaller saving for a poor person would be worth more than a bigger saving for a wealthy person.

With all that being cleared up, what would I do if I had it all my own little way? Well, the only way in which we can make any meaningful impact on the lives of the poor is through the rapid development of our industry, society and even the Government

Phase One: Rapid Industrial Development and Decentralisation

Disband the Industrial Development Corporation and replace it with a Government Business Unit, the board of which will be comprised of the Minister of Trade and Industry, the Minister of Mineral Resources, the Minister of Economic Development and the Minister of Finance as well as several business people nominated by the business community. Its first order of business would be the immediate systematic privatisation of 50.1% of the South African Post Office, South African Airways, the South African Broadcasting Corporation, the entire railway fleet of TRANSNET and ESKOM’s power generating capacity. At no point will international investors own more than 20% of these companies, while the State will retain control the power grid and railway infrastructure in order to exert maximum pressure on the final costs to consumers if the need should arise. The moratorium on private railway companies and power generation will be lifted while the Parastatals will charge rent on the usage of the infrastructure.

Half of the proceeds of these sales will be used for the repairing and expanding the country’s ageing rail and power infrastructure while the remaining funds will be earmarked for the sole purpose of expanding Government’s footprint in certain industries of national or strategic importance. The GBU would, for example, be responsible for creating a large scale steel smelter and mill through public-private partnerships that would be aimed at creating steel products for the local and African markets. In order to facilitate its operation, mining licenses would be changed to give GBU related companies first option on the purchase of a certain amount of resources, 15% for example, produced by private mining firms. The shares in and profits from the new companies and former parastatals will be retained by the GBU for a minimum period of ten years or until the business generates a set return on investment after which the shared held by the GBU will be systematically redistributed to all the people of South Africa who obtain a matric certificate, with an additional number for all levels of tertiary qualification, under the proviso that they do not “come from wealth.”

Due to the time delays, poor quality and corruption brought about by the current tender system, I also envisage the creation of a State Engineering Company to undertake all future public works programs and projects. Since such a company will have to be massive and have a vast impact on private engineering firms, the new Company will initially operate as a conglomerate controlled by a board comprising of the Minister of Public Works and executives from private engineering firms. To ensure that the wealth generated by the Public Works Program is not only shared by these companies, a certain percentage of all projects will be outsourced to small, local construction companies and these companies will then have the option of functioning under a Company Affiliation Program in order to facilitate their future growth and success through the transfer skills, economy of scale and bargaining power brought to the table by bigger firms.

On the subject of land reform, the State will not sell any of the 16.8 million hectares of farmland under its ownership to private individuals. Instead, parts of the land will be converted into training centres for aspirant farmers and once they have proved their ability to run commercial farms, they will be awarded with pieces of land currently under Government ownership. In order to protect food security and the prices of foodstuffs, all outstanding land claims against privately owned agricultural land will be suspended until such time as the State has no further land, apart from the training centres, available for redistribution. Only then will the land restitution process continue under the willing buyer-willing seller principle.

Benefits of Phase One

-          The most obvious benefit from the proposed measures is that we solve our electricity supply problems almost immediately while adding absolutely no pressure or additional burden to the taxpayer and as the private companies innovate, the cost of electricity for end users will decline.

-          We also solve our railway capacity problems. Currently, 90% of our national freight transportation is done at high costs via the road network and the costs are always passed on to the consumer. Not only is rail transport cheaper to the tune of an estimated R2 per ton of freight per kilometre, but we will also experience massive savings via the reduced maintenance bill with regards to road infrastructure that could then be used to fund other social projects.

-          Thousands of job opportunities will be created virtually overnight due to the construction of new power plants, administrative centres and other infrastructure.

-          No more costly bailouts for failing parastatals like SAA and the SABC.

-          By following a program of industrial decentralisation we create the space and opportunity to bring economic opportunity to people living in poorer rural areas, with the added bonus of creating spin off job and business opportunities for local residents and a further reduction in transportation costs.

-          The eventual redistribution of shares will reduce poverty while serving as an incentive for young people to complete their primary education and obtain the maximum qualification that they can.

-          An opportunity to beneficiate our own resources is created that will reduce our reliance on importing finished products from abroad, ease the burden on our foreign reserves and with possible future expansions into Southern and the rest of Africa, these products hold great potential.

-          The abolishment of the tender system will virtually wipe out Government corruption where public works projects are concerned and ensure that quality infrastructure reach more people in a shorter amount of time.

-          It will also go a long way in preventing instances where a project has to be re-launched due to poor quality, like when the bridges in Limpopo washed away because they were poorly built by some “Comrade in Thief’s” On Point Engineering company.

-          The protection/expansion of our food security and production would take great strides in containing food price inflation that averaged 14% for the first half of 2013 alone, while the salary increase for the average South African worker was around 5.5% for the same period.

Of course, these are just a few suggestions on what we might do to solve our structural economic problems and I am sure that there are many more suggestions out there, so please don’t be shy to contribute your thoughts because I certainly do not presume to have all the answers. It should also be said that what has been posted here is but a part of the overall solution, but this is a long enough piece already.